How the gold banking system operates for surreptitious price suppression

By cpowell

Created 2016-12-03 15:39

10:36a ET Saturday, December 3, 2016

Dear Friend of GATA and Gold:

Bullion Star in Singapore this week produced a primer about the international gold banking system, showing how central banks use it to create a vast amount of imaginary "paper gold" for largely surreptitious price suppression in defense of their own currencies.

Bullion Star explains: "Even if the bullion banks have access to borrowed central bank gold stored at the Bank of England, that gold is owed to the lending central banks, and therefore has multiple claims on it. If there was a run on the fractional-reserve bullion banking system by customers wanting to convert their unallocated positions to allocated gold holdings, analogous to a bank run where all customers want to withdraw their cash at the same time, this could lead to some serious problems in the ability of the bullion banks to provide the required gold. Such a situation would undoubtedly require cash settlement of customer positions, a move that would see the price of paper gold collapse while the price of physical gold would skyrocket."

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